GENEVA—Switzerland announced Aug. 28 that it has approved the terms of a proposed settlement with the United States that would allow Swiss banks not currently under investigation by the U.S. Department of Justice to avoid prosecution for helping U.S. clients avoid paying tax in exchange for payment of a fine.

The Federal Council, the Swiss government's executive arm, said in a statement that it “discussed the proposal for resolving past issues in the tax dispute with the United States and gave its agreement in principle to the finalization of a joint statement.”

“The Federal Council has instructed the Federal Department of Finance [FDF] to conclude the corresponding work,” it said. “As soon as the joint statement has been signed with the United States, the text of the document will be published. The signing of the joint statement should enable Swiss banks to resolve the tax dispute with the United States within the scope of existing” Swiss legislation.